Thursday, August 19, 2010

Walking Away From a Microsoft Licensing Agreement

When finances are tight it's not uncommon for companies to start expiring their maintenance contracts, including software maintenance. As with any maintenance agreement that is allowed to expire, it's important that an organization understand the full implications of their actions so that it is a strategic event rather than a reactionary one. 

This is a big topic so will cover several postings - check back for more updates or e-mail us with specific questions. 

Microsoft has three primary ways for an organization to acquire licensing rights - subscription licensing (Microsoft Desktop Optimization Pack aka MDOP is an example), perpetual licensing (their traditional model where once you buy it you own the rights forever), or perpetual with maintenance (Microsoft Software Assurance aka SA). 

Subscription licensing expires at the end of the subscription agreement (unless there is a buy-out option). I'm not going into details on this type for this article. 

Perpetual licensing does not expire but also does not have upgrade rights. So again will not be discussed in this article. 

Perpetual licensing with Software Assurance includes upgrade rights until the SA expires. When SA expires, your organization is entitled to the latest version of the product which has been released to volume licensing customers. Those licenses then become perpetual licenses but inherit the licensing terms from the agreement under which they were acquired. 

For example, a customer who had a full platform Microsoft Enterprise Agreement (which automatically includes SA) which they allowed to expire at the end of May 2010 would walk away with perpetual licenses for the following Microsoft products: Office Professional Plus 2010, Windows Server 2008 Client Access License (CAL), Exchange Server 2010 Standard CAL, SharePoint Server 2010 Standard CAL, System Center Configuration Manager 2007 R2 Client Management License and Windows 7 Enterprise (but be aware of any subscription components, those are not perpetual). However; those perpetual licenses will always be restricted to the licensing rights under the Enterprise Agreement (for example, no secondary use rights for Microsoft Office which means if a user has a desktop and a laptop each would require its own license). 

While a license is covered under SA, it is at it's most flexible. Consider your future plans prior to allowing SA to expire. A couple of things to think about: 1) Will you be using any of the enhanced functionality of the Microsoft Enterprise CAL Suite? 2) Will you be increasing your server virtualization efforts and will Microsoft Windows Enterprise Server or Microsoft Windows Datacenter edition provide you with a more cost effective solution? 3) Are you licensed under Device CALs when User CALs might be more effective or vice versa - these can only be changed at time of renewal and guess're not renewing. 

However; now is still the time to push the envelope on this (before expiration) as there are ways of getting this changed as long as you still have active SA. The first two scenario's would be covered by "Step-up" licenses from lower versions carrying SA. This allows you to leverage the monies you've already spent on the lesser edition by paying a reduced price for the higher edition but can only be completed while you have active SA on the product. 

Watch for more to come...or if you're considering walking away from a Microsoft Licensing Agreement talk to us first, it can help you avoid future costs and headaches!


Paul said...

Good post and important topic.
Wondering if you would see the portable use rights (in the PUR, for all desktop applications purchased through a volume agreement), which are permanent, as a substitute for the home use program in the EA, which, as you note, go away when the EA ends.

Cynthia Farren said...

Thanks Paul, your comments are much appreciated and you raise an excellent question.

Yes, I do see portable use rights as potentially a viable replacement for the loss of home use (although it wouldn't have applied in this scenario as they didn't become effective until July 1, 2010) assuming a company is internally hosting these applications and have Remote Desktop Services CALs.

Obviously in this case it would probably make sense for the company to have User CALs for these Users rather than Device CALs (which are the default type of CAL on an EA) so that they don't have to have Windows Server CALs and other applicable CALs for each remote device.

Anonymous said...

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Thank You!

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Anonymous said...

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Cynthia Farren said...

Alex, thank you for your interest in the content of my blog.

The answer to you (and any other interested party) is that I grant you the right to re-use content posted on my blog as long as (a) it remains in proper context, (b) a cross-link is provided back to my blog and (c) proper credit is provided identifying me as the source of the information.

Thanks again for your interest - feel free to reach out to me with any posting you think might be of interest to myself or the audience of this blog!

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Cynthia Farren said...

Jack, thanks for the compliment and the heads up on the broken link.

I reviewed all links in the document and can't find the one you are referring to - if you can let me know I can fix it or often get you the original source material through another venue.

Let me know - thanks!

Anonymous said...

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Charmaine said...

Very nice article Cynthia & also well written! It's remarkable how few customers really understand their own licensing agreements :)

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Unknown said...

Very interesting post, thank you! Just one question, what will happen with Windows 7 Enterpise? Thoritcally we will buy out it but in other hand Enterprise version is only for SA, so do we need to downgrade to Win 7 Pro with consequence like reinstalling all computers?

Cynthia Farren said...

Good question Patryk, you will have perpetual rights to Windows 7 Enterprise so no need to re-touch all those computers. However; the Software Assurance benefits of Windows 7 Enterprise can no longer be used. For example, MDOP (if you subscribed to that) and VDI access would no longer be available to you. You'll want to review the Product Use Rights ( that are in effect as of when you would be considering exiting your SA to determine what would be lost by dropping SA. Hope this helps - let me know!

James said...

Cynthia, regarding Windows 7 Enterprise, you say if you let SA expire, Windows 7 Enterprise is still perpetual and you can keep using it on computers you have already installed it on correct?

What about if you get a new computer for a new user? Wouldn't you be stuck with Pro, because your SA is expired and you can no longer assign the SA to the new device?

Isn't this true if you are replacing a broken workstation as well? If I understand correctly, you would have to install Pro on these new devices because you can't reassign the actual Enterprise license you can only reassign the SA, but if the SA is expired, obviously you can't reassign it so you are stuck with Pro. Do I understand that correctly?

Cynthia Farren said...

James, sorry it took me so long to post and respond to your comment...unfortunately the spammers of the world were very busy when you posted your comment so it took a while for us to find it (yes, we try to make sure the only comments posted are legit not a way to scam our readers).

You are correct in your interpretations - the Enterprise edition is tied to the hardware that was in place when you expired your SA.

Good news though is that you can (now) buy Windows Enterprise without having an EA so you can get your new or replacement hardware and buy the Enterprise license for just those devices without having to keep everything under an Enterprise Agreement (you still wouldn't have the SA benefits particular to the OS but even those you could get by enrolling it in SA if you were looking for a way of easing back into a Microsoft EA in the future).

Hope this helps and thanks for the patience!

Anonymous said...

Hi Cynthia,

Interesting article. My query is after expiry of Enterprise agreement, the licenses become perpetual to the organization.

If I do not renew the agreement, will the downgrade rights disappear? That is after expiry I had the right to use Win 8.1, the latest OS. But post agreement can I still use upto N-1, N-2 versions?

Appreciate your comments.

Cynthia Farren said...

Thanks for your question regarding OS downgrade rights after your Enterprise Agreement expires.

Downgrade rights are inherent in the license entitlement (not a software assurance benefit) and the method through which that software was acquired.

Therefore, since you acquired the OS through the Enterprise Agreement you would continue to have the same downgrade rights even after you allow the Enterprise Agreement to expire.

The only thing you would lose is the benefits that are Software Assurance benefits (which do not apply to downgrade rights as of September 2014...for future readers - since this post will live for many more years please check the current SA benefits to make sure that is still the case when this applies to your situation).

Hope this satisfactorily answered your question!